chapter 9 project managament subjet
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Project ManagementTRANSCRIPT
Chapter 9 Reducing Project Duration 175
Chapter 9
REDUCING PROJECT DURATION
Chapter Outline
1. Rationale for Reducing Project Duration
2. Options for Accelerating Project Completion
A. Options When Resources Are Not Constrained
i. Adding Resources
ii. Outsourcing Project Work
iii. Scheduling Overtime
iv. Establish a Core Project Team
v. Do It Twice—Fast and Correctly
B. Options When Resources Are Constrained
i. Fast-Tracking
ii. Critical-Chain
iii. Reducing Project Scope
iv. Compromise Quality
3. Project Cost-Duration Graph
4. Constructing a Project Cost-Duration Graph
A. Determining the Activities to Shorten
B. A Simplified Example
5. Practical Considerations
A. Using the Project Cost-Duration Graph
B. Crash Times
C. Linearity Assumption
D. Choice of Activities to Crash Revisited
E. Time Reduction Decisions and Sensitivity
6. What if Cost, Not Time, Is the Issue?
A. Reduce Project Scope
B. Have Owner Take on More Responsibility
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C. Outsourcing Project Activities or Even the Entire Project
D. Brainstorming Cost Savings Options
7. Summary
8. Key Terms
9. Review Questions
10. Exercises
11. Case: International Capital, Inc.—Part B
12. Case: Whitbread World Sailboat Race
13. Case: Nightingale Project—A
14. Case: Nightingale Project—B
15. Case: The “Now” Wedding—Part A
16. Case: The “Now” Wedding—Part B
Chapter Objectives
To understand how to use the critical path to reduce project duration
To explain alternative methods for crashing activities
To explain the risks associated with compressing or crashing a project
To recognize when a project manager should try for the optimum cost-duration.
Review Questions
1. What are five common reasons for crashing a project?
Reasons given could include:
Imposed deadline in which disfavor will be earned by not meeting superior’s
deadline
Time to market competitive advantage
Realize benefits from incentive contracts
To make up for lost time and avoid contract penalties
Save extensive overhead costs
Free up resources to work on other projects
Exceed customer expectations.
2. What are the advantages and disadvantages of reducing project scope to
accelerate a project? What can be done to reduce the disadvantages?
Reducing the scope of the project can lead to big savings both in time and costs. It
typically means the elimination of certain tasks. At the same time scaling down the
scope may reduce the value of the project such that it is no longer worthwhile or fails
to meet critical success parameters. The key is reassessing the project requirements
to determine which are essential and which are optional. This requires the active
involvement of all key stakeholders. More intense re-examination of requirements
Chapter 9 Reducing Project Duration 177
may actually improve the value of the project by getting it done more quickly and for
a lower cost.
3. Why is scheduling overtime a popular choice for getting projects back on
schedule? What are the potential problems for relying on this option?
Scheduling overtime is popular because if it involves salary workers and no direct
costs are added to the project. Even if it involves additional costs, you avoid Brook’s
law and minimize additional coordination and training costs. The disadvantages are
the additional time and half costs associated with hourly overtime and stress and
fatigue that come with working long hours which can lead to accidents, inferior
performance, and turnover.
4. Identify four indirect costs you might find on a moderately complex project.
Why are these costs classified as indirect?
Indirect (overhead) costs are costs that cannot be attributed to a specific activity or
work package. Examples of indirect costs are supervision, consultants, debt interest
charges, machinery common to several activities, accounting and information
processing, public relations, penalties or incentives for early or late completion. In
practice it is amazing how many project compression decisions are made without
serious consideration of indirect costs.
5. How can a cost-duration graph be used by the project manager? Explain.
A cost-duration graph is useful to the project manager for comparing alternatives.
Any alternative that moves the project duration away from the optimum cost-duration
point will increase costs. Additionally, incentives and penalties can be evaluated
against the total, low cost point.
6. Reducing the project duration increases the risk of being late. Explain.
Compressing the project duration means slack (float) on noncritical activities will be
reduced. When slack of noncritical activities is reduced, the chance of new critical
paths occurring increases; hence, the risk of the project becoming late increases. In
addition, compressing will have the following other impacts on managing the project:
Reduces flexibility by using slack
Can increase number of critical activities
Can increase interdependencies of paths
Makes resource scheduling tighter (critical)
May increase costs.
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7. It is possible to shorten the critical path and save money. Explain how.
The only way to shorten the critical path and save money is to have indirect costs
which are greater than the additional direct costs of shortening the critical path one
unit of time. The difference is a savings.
Exercises
Note: Use the procedure presented in the chapter example to compute exercises; that is,
compress one time unit per move using the least-cost method.
1. Draw a project network from the following information.
Activity Predecessor Duration
A None 2
B A 4
C A 3
D A 2
E B 3
F C 6
G C, D 5
H E, F 6
I G 5
J H, I 5
Activities B and H can be shortened to a minimum of 2 weeks. Which activity
would you shorten to reduce the project duration by 2 weeks? Why?
Chapter 9 Reducing Project Duration 179
2. Assume the network and data that follow. Compute the total direct cost for each
project duration. If the indirect costs for each project duration are $400 (19
time units), $350 (18), $300 (17), and $250 (16), compute the total project cost for
each duration. Plot the total direct, indirect, and project costs for each of these
durations on a cost-time graph. What is the optimum cost-time schedule for the
project? What is this cost?
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Chapter 9 Reducing Project Duration 181
The optimum duration is 17 time units at a cost of $840.
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3. Given the data and information that follow, compute the total direct cost for
each project duration. If the indirect costs for each project duration are $90 (15
time units), $70 (14), $50 (13), $40 (12), and $30 (11), compute the total project
cost for each duration. What is the optimum cost-time schedule for the project?
What is this cost?
Chapter 9 Reducing Project Duration 183
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Chapter 9 Reducing Project Duration 185
4. If the indirect costs for each duration are $1,200 for 16 weeks, $1,130 for 15
weeks, $1,000 for 14 weeks, $900 for 13 weeks, $860 for 12 weeks, $820 for 11
weeks and $790 for 10 weeks, compute the total costs for each duration. Plot
these costs on a graph. What is the optimum cost-time schedule?
Note: The duration for this schedule is weeks and students should be told only to
crash the network one week at a time (not days).
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For duration 14, B is chosen over D & E because it is the earliest task. If problems
occur, you can crash D or E.
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Chapter 9 Reducing Project Duration 189
5. If the indirect costs for each duration are $300 for 27 weeks, $240 for 26 weeks,
$180 for 25 weeks, $120 for 24 weeks, $60 for 23 weeks, and $50 for 22 weeks,
compute the direct, indirect and total costs for each duration. What is the
optimum cost-time schedule? The customer offers you $10 dollars for every
week you shorten the project from your original network. Would you take it? If
so for how many weeks?
Note: The duration for this schedule is weeks. Students should be reminded that they
crash the schedule one week at a time (not divide the week into days).
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Chapter 9 Reducing Project Duration 191
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Chapter 9 Reducing Project Duration 193
6. Use the information contained below to compress one time unit per move using
the least cost method. Reduce the schedule until you reach the crash point of the
network. For each move identify what activity(s) was crashed, the adjusted total
cost, and explain your choice if you have to choose between activities that cost
the same.
Note: Crash point of the network is the point in which the duration cannot
be reduced any further.
Activity ID Slope
Maximum Crash Time
Direct Costs Normal Crash
Time Cost Time Cost
A - 0 4 $50 0 -
B $40 3 5 70 2 $190
C 40 1 5 80 4 120
D 40 2 4 40 2 120
E 40 2 5 60 3 140
F 40 1 5 50 4 90
G 30 1 4 70 3 160
H 30 1 4 80 3 110
I - 0 3 50 0 -
Total direct normal costs— $550
Caution: There is an error in the text – the “crash” cost for Activity C should be 120,
not 40. This should not be a problem for most students since the slope is correctly
listed as $40, but we encourage you to point this out before assigning this exercise.
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Chapter 9 Reducing Project Duration 195
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Case
International Capital, Inc.—Part B
See Teacher’s Manual, Chapter 7
Appendix Case for Part A of problem.
Part A suggests that the project would have to be compressed down to 61 days to reach
the 95% chance of meeting the average. Compressing follows the steps listed below.
Start at 73 workdays
Cut A 3 days $1,500 70 days
Cut K 6 days 6,000 64 days
Cut J 1 day 1,000 63 days
Cut H 1 day 2,000 62 days
Cut D 1 day 3,000 61 days
TOTAL $13,500
However, when these data are plotted with the indirect costs, the picture changes slightly.
The optimum time/cost tradeoff is 70 days. See chart below. Clearly, the risk of being
late has increased. Activities A&B are parallel and have added a critical path.
Compressing D one day reduces slack for Activities E&F to one day. Brown and the
project review committee have a trade off decision themselves. To get to 61 days will
cost $5,700 ($159,200 – 153,500).
Duration Project Normal Direct Total Total
Overhead Direct Costs Crash Costs Direct Costs Costs
60
61 42,700 103,000 13,500 116,500 159,200
62 43,400 103,000 10,500 113,500 156,900
63 44,100 103,000 8,500 111,500 155,600
64 44,800 103,000 7,500 110,500 155,300
65 45,500 103,000 6,500 109,500 155,000
66 46,200 103,000 5,500 108,500 154,700
67 46,900 103,000 4,500 107,500 154,400
68 47,600 103,000 3,500 106,500 154,100
69 48,300 103,000 2,500 105,500 153,800
70* 49,000 103,000 1,500 104,500 153,500
71 49,700 103,000 1,000 104,000 153,700
72 50,400 103,000 500 103,500 153,900
73 51,100 103,000 - 103,000 154,100
74 51,800 103,000 - 103,000 154,800
Chapter 9 Reducing Project Duration 197
Case
Whitbread World Sailboat Race
This is a fairly difficult case in which students have to create a project schedule and then
use the time-cost method to determine whether it is possible to meet the 45 week deadline
and $3.2 million budget limit. Students also have to factor in indirect costs in the form of
a hammock for the additional cost of keeping vessels in service.
Whitbread Project
(Costs in $000)
Activity Normal
Time
Normal
Cost
Crash
Time
Crash
Cost
Slope
A Design 6 $ 40 4 $ 160 60
B Build hull 12 1,000 10 1,400 200
C Install ballast tanks 2 100 2 100 -
D Order mast 8 100 7 140 40
E Order sails 6 40 6 40 -
F Order accessories 15 600 13 800 100
G Build deck 5 200 5 200 -
H Coat hull 3 40 3 40 -
I Install accessories 6 300 5 400 100
J Install mast and sails 2 40 1 80 40
K Test 5 60 4 100 40
L Sea trials 8 200 7 450 250
M Select crew 6 10 5 20 10
N Secure housing 3 30 3 30 -
O Select crew equipment 2 10 2 10 -
P Order crew equipment 5 30 5 30 -
Q Routine sail/maintenance 15 40 12 130 30
R Crew maintenance Train 10 100 9 340 240
S Initial sail training 7 50 5 350 150
Total direct cost $2,990
Hammock (Indirect costs):
Costs for keeping old vessel in service = $4,000/week for 25 weeks = $100,000
Cost for keeping new vessel in service for training = $6,000/week for 19 weeks = $114,000
Total hammock indirect costs = $214,000
Normal costs for 50-week plan:
Normal direct costs $2,990,000
Indirect costs (hammock) 214,000
Total costs $3,204,000
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Compressed to 45 Weeks:
Costs for keeping old vessel in service = $4,000/ week for 21 weeks = $84,000
Cost for keeping new vessel in service for training = $6,000/week for 19 weeks = $114,000
Total hammock indirect costs = $198,000
Compressed Activities:
A 2 weeks = 60,000+60,000 = $120,000
B 2 weeks = 200,000+200,000 = 400,000 (Reduce hammock 2 weeks)
R 1 week = 240,000 = 240,000
$760,000
Normal direct costs 2,990,000
Indirect costs (hammocks) 198,000 (21x4,000=84,000) + (19x6,000=114,000)
Total costs $3,948,000
Chapter 9 Reducing Project Duration 199
Upon working the problem, students should advise Bjorn that yes it is possible to
complete the project in 45 weeks but that the cost is estimated to be $3.948 million. This
is $748,000 more than Bjorn’s $3.2 million. This begs the question of priorities. When
asked what the priorities of the project are most students will rightly indicate:
Whitbread Project Priority Matrix
TIME PERFORMANCE COST
Constrain X X
Enhance X
Accept
Students will point out that both time (45 weeks) and budget ($3.2 million) are
constrained. However, based on their analysis it is impossible to meet both constraints.
Given that performance (victory) is the primary goal, one should argue that Bjorn should
seek additional funding and accept cost over-run. This is an important lesson. Often
projects begin with similar constraints but are forced to make a trade off in the final
analysis.
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Case
Nightingale Project—Part A
This case, along with Part B, is designed to have the students use the tools and concepts
introduced in Chapters 6 and 9 to answer some basic questions concerning the schedule
of the Nightingale Project. It is an excellent vehicle for training students to use project
management software to create a network and assess alternative courses of action. At our
college the students have access to MS Project and we have found that students are
capable of completing this assignment by simply following the Tutorial contained within
the program and on the CD-Rom.
Note: The answers provided are based on a January 1, 2010 start date which due to
holidays means the project begins on January 4, 2010. We suggest you tell students to
use this start date to insure consistency in answers.
Students should submit a project schedule similar to the one presented in computer output
below to support their answers.
1. Will the project as planned meet the October 25th deadline?
No, the scheduled completion date is 12/21/10.
2. What activities lie on the critical path?
Architectural decisions Feature specifications Database Review design
Integration Procure prototype components Assemble prototypes Lab test
Chapter 9 Reducing Project Duration 201
prototype Field test prototypes Adjust design Order stock parts Assemble
first production unit Test unit Produce 30 units Train sales representatives.
3. How sensitive is the network?
The text defines sensitivity as the likelihood that the critical path may change during
the course of the project. Sensitivity results from the number of critical paths and the
amount of slack available to non-critical activities.
Based on the information provided, this project is a fairly insensitive network. Most
non-critical activities have between 20-37 days of slack, exceeding their estimated
duration times. The lone exceptions are Price components which has only 5 days of
slack and Order custom parts which has 8 days of slack. However, given the nature
of these tasks it is unlikely that they will take more than 5 days beyond their
estimated duration time to complete. It should also be noted that, after an initial burst
of activities, there are only two non-critical activities (Document design and Order
custom parts) during the second half of the project.
Case
Nightingale Project—Part B
Students should assess the suggestions presented in Part B and prepare a short memo to
respond to the questions presented at the end of the case.
202 PROJECT MANAGEMENT: THE MANAGERIAL PROCESS
1. Is it possible to meet the deadline?
Yes, it is possible. The revised schedule has a projected completion date of October
25th, right before MedCON.
2. If so, how would you recommend changing the original schedule (Part A) and
why? Assess the relative impact of crashing activities versus introducing lags to
shorten project duration.
While crashing activities will reduce project duration, introducing the suggested start-
to-start lags has the biggest impact on schedule with the added bonus of no additional
costs. The completion date was 11/10/10 after introducing all of the start-to-start
lags.
Implement:
Document design could begin 5 days after the start of the review design.
Adjust design could begin 15 days after the start of field test prototypes.
Order stock parts could begin 5 days after the start of adjust design.
Order custom could begin 5 days after start of adjust design.
Training sales representatives could begin 5 days after the start of test unit and
completed 5 days after the production of 30 units.
To meet the October 25 deadline, three critical activities need to be crashed.
Crash activities:
Creation of database from 40 days to 35 days at a cost of $35,000.
Procure prototype components from 20 days to 15 days at a cost of $30,000.
Order stock parts from 15 days to 10 days at a cost of $20,000.
These three activities are on the critical path and would reduce the project duration by
15 working days at a cost of $85,000.
Neither External specifications, Document design, nor Voice recognition are on the
critical path so, crashing these activities would have no impact on project duration.
3. What would the new schedule look like?
Students should present a revised schedule similar to the table above.
4. What other factors should be considered before finalizing the schedule?
The team needs to review the suggested revisions and make sure they are feasible.
When crashing activities, there is always the danger that quality may be
compromised; they need to take steps so that this doesn’t happen. The team needs to
Chapter 9 Reducing Project Duration 203
assess the impact of these changes on the sensitivity of the network. A quick
assessment of the slack available to noncritical activities suggests that the sensitivity
of the network has not changed significantly, which enhances the chances of the
project meeting the deadline. Introducing start-to-start lags may create resource
conflicts if the same people are working on both activities. The team needs to check
and make sure there are adequate resources available to avoid this problem. Finally,
there is no slack between the estimated completion date and MedCON. The team
should consider contingency plans if critical activities slip. One plan would be to
have funds ready if it is necessary to crash production of the prototypes which occurs
at the tail end of the project.
Assignment Variation
Part A could be assigned after completing Chapter 6 and Part B could be assigned for
Chapter 9.
Case
The “Now” Wedding—Part A
This is a great case for a class exercise. Students enthusiastically enter into the case and
have fun.
The case can be used several ways. First, the case can be used as a small team/group
assignment. Second, the case can be used as suggested in the text—as an in-class
exercise.
Starting with the yellow sticky approach will get you past the many differences of
opinion on how the network is developed. Careful reading of the case should bring the
group around to the network suggested in the attached exhibits.
Development of the original network suggests that the wedding cannot make the January
21 deadline. It would take until January 26 and be too late for Connor’s ship out date of
January 30.
204 PROJECT MANAGEMENT: THE MANAGERIAL PROCESS
However, two tasks can be shortened at an additional cost and the deadline reached.
Activity 8, Order material, can be cut from 8 days to 5 days at a cost of only $20.
Activity 11, Sew dress, can be cut from 11 days to 9 days at a cost of $96 ($48x2).
Activity 16, Mail invitations, must go out 10 days before the wedding.
Reduce Activity 12, Order and receive invitations, from 7 days to 6 days. The cost is
$20.
Reduce Activity 13, Address invitations, from 3 days to 1 day. The cost is $80
($40x2).
Total costs = $216
The deadlines are met. The wedding can take place January 21 and have a seven-day
honeymoon. Connor can leave on January 30.
Case
The “Now” Wedding—Part B
Part B presents some unknown risk events. Given these events, students will attempt to
shorten Activity 11 and revise durations for Activity 7 and 12.
Activity 11, Sew dress. Cut from 9 to 6 days at a cost of $144 ($48 x 3).
Activity 7, Guest list. Add 3 days for the flu. Now duration is 7 days.
Activity 12, Order and receive invitations. Add 1 day for press breakdown; now the
duration is 7 days.
Chapter 9 Reducing Project Duration 205
Conclusion: Deadlines cannot be reached! The notice of the loss of dress material
(Activity 8) in transit received January 10 kills the January 21 deadline. Reordering on
January 11 won't do it!
Although students are disappointed, give them an opportunity to suggest some
alternatives. We find two suggestions almost always come up quickly.
1. Buy the material locally and pay the price.
2. Buy a ready-made wedding dress.
206 PROJECT MANAGEMENT: THE MANAGERIAL PROCESS
TRANSPARENCIES (for exercises)
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Chapter 9 Reducing Project Duration 208
Exercise 2 (a)
Chapter 9 Reducing Project Duration 209
Exercise 2 (b)
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Exercise 2 (c)
Chapter 9 Reducing Project Duration 211
Exercise 3 (a)
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Exercise 3 (b)
Chapter 9 Reducing Project Duration 213
Exercise 3 (c)
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Exercise 4 (a)
Chapter 9 Reducing Project Duration 215
Exercise 4 (b)
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Exercise 4 (c)
Chapter 9 Reducing Project Duration 217
Exercise 4 (d)
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Exercise 5 (a)
Chapter 9 Reducing Project Duration 219
Exercise 5 (b)
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Exercise 5 (c)
Chapter 9 Reducing Project Duration 221
Exercise 5 (d) with graph
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Exercise 6